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ONE BIG THING

Up 20% Since May, Eastgroup Properties Continues To Impress Wall Street

What: Eastgroup Properties has given its shareholders a total gain of 20% since May 1, as the REIT continues to demonstrate strength. If analysts are correct, Eastgroup shares could rise another 12% or more over the next year.

Who: Eastgroup Properties Inc (NYSE: EGP) is a Ridgeland, MS-based industrial REIT, operating primarily in the Southeastern states and the west coast of the U.S. 89% of its portfolio is business distribution buildings. Its total portfolio, including properties presently under development, comprises approximately 60.2 million square feet.

Eastgroup was founded in 1969 and is a member of the S&P Mid-Cap 400 and Russell 1000 indices. As of June 30, it had 97.4% of its properties under lease.

Why: The recent news has been very positive for shareholders:

On July 30, Eastgroup Properties released its second-quarter operating results. Funds from Operations (FFO) of $2.05 per share was in line with analysts’ estimates but trounced its FFO of $1.89 from Q2 2023. Revenue of $159.09 million beat the estimates of $157.00 million and was far ahead of revenue of $139.89 million in the year-ago same quarter.

 On August 23, announced its Board of Directors approved a 10.2% increase in its quarterly dividend, raising it from $1.27 per share to $1.40 per share, payable October 15 to shareholders of record on September 30.

Through June 30, Eastgroup had increased or maintained its dividend for 31 consecutive years, and with this latest dividend announcement, it has now increased the dividend for 28 of the past 31 years. The yield is now 3.03%.

The forward payout ratio is still a comfortable 67.3%. The one caveat is the Price/FFO ratio of 22.18 is well above the sub-sector median level of 14.50%.

Recent analyst ratings and price targets have all been positive. On July 22, Wedbush analyst Richard Anderson upgraded Eastgroup Properties from Neutral to Outperform and raised the price target by 28.3% from $162 to $208. Then on August 5, analyst Anderson maintained Eastgroup at Outperform and raised the price target again from $208 to $209.

On August 22, Morgan Stanley analyst Stephen Byrd maintained Eastgroup at Equal Weight and raised the price target from $158 to $186. On August 28, Wells Fargo analyst Blaine Heck upgraded EastGroup from Equal-Weight to Overweight and raised the price target from $179 to $214.

Takeaway: Eastgroup Properties is on a roll and the Board’s decision to raise the dividend by a generous 10.2% shows its confidence in sustaining or improving on its Q2 earnings going forward. The stock has already surpassed the price targets of several analysts and seems poised to eventually challenge the Wedbush or Wells Fargo targets.

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REIT Roundup

Four Corners Property Trust Inc (NYSE: FCPT) August 26, announced it has acquired 19 Bloomin’ Brands Restaurant properties comprising 20 total restaurants across 10 states for $66.4 million. The restaurants in the package include 10 Outback Steakhouse and 10 Carrabba’s Italian Grill restaurants.

Plymouth Industrial REIT Inc (NYSE: PLYM) August 27, announced it has formed a strategic partnership with global investment firm, Sixth Street to pursue acquisitions in the Chicago area. Sixth Street will provide $250 million in capital to the joint venture.

Regency Centers Corp (NYSE: REG) August 26, announced the commencement of Oakley Shops at Laurel Fields in Oakley, CA. Oakley shops will include 79,000 square feet of retail, including a Safeway supermarket. This marks Regency Centers’ first development into Northern California.

Upgrades

Gaming and Leisure Properties Inc (Nasdaq: GLPI) August 23, Wolfe Research analyst Andrew Rosivach upgraded Gaming and Leisure Properties from Peer Perform to Outperform and announced a $57 price target.

Mid-America Apartment Communities Inc (NYSE: MAA) August 26, Wells Fargo analyst James Feldman upgraded Mid-America Apartment Communities from Equal-Weight to Overweight and raised the price target from $136 to $174.

Camden Property Trust (NYSE: CPT) August 26, Wells Fargo analyst James Feldman upgraded Camden Property Trust from Underweight to Equal-Weight and raised the price target from $104 to $127.

American Homes 4 Rent Class A (NYSE: AMH) August 26, Wells Fargo analyst James Feldman upgraded American Homes 4 Rent from Equal-Weight to Overweight and raised the price target from $36 to $42.

Kite Realty Group Trust ( NYSE: KRG) Wells Fargo analyst Dori Kesten upgraded Kite Realty Group Trust from Underweight to Equal-Weight and announced a $36 price target.

Phillips Edison & Co Inc (Nasdaq: PECO) Wells Fargo analyst Tammi Fique upgraded Phillips Edison from Underweight to Equal-Weight and announced a $37 price target.

Eastgroup Properties Inc (NYSE: EGP) Wells Fargo analyst Blaine Heck upgraded Eastgroup Properties from Equal-Weight to Overweight and raised the price target from $179 to $214. (See story below)

Downgrades

Equity Residential (NYSE: EQR) August 26, Wells Fargo analyst James Feldman downgraded Equity Residential from Overweight to Equal-Weight and raised the price target from $69 to $77.

Invitation Homes Inc (NYSE: INVH) August 26, Wells Fargo analyst James Feldman downgraded Invitation Homes from Overweight to Equal-Weight and raised the price target from $37 to $38.

Terreno Realty Corp (NYSE: TRNO) Wells Fargo analyst Blaine Heck downgraded Terreno Realty from Overweight to Equal-Weight and announced a $75 price target.

Dividend News

Eastgroup Properties Inc: August 23, announced a 10.2% increase in its quarterly dividend.

Insider Transactions

BXP Inc (NYSE: BXP) August 26, Peter V. Otteni, Executive VP, sold 2,785 shares of company stock with a total value of $351,420.

Omega Healthcare Investors Inc (NYSE: OHI) August 26, Daniel Booth, COO, sold 25,000 shares of company stock, valued at $967,680.

Prologis Inc (NYSE: PLD) August 26, Joseph Ghazal, CIO, sold 5,200 shares of company stock with a total value of $671,164.

Winners & Losers

📈 Biggest Winners This Week: Office and Diversified REITs

• Orion Office REIT Inc (NYSE: ONL) Up 11.50%

• Peakstone Realty Trust (NYSE: PKST) Up 10.29%

• Bridge Investment Group Holdings Inc (NYSE: BRDG) Up 10.07%

• Seritage Growth Properties Class A (NYSE: SRG) Up 8.71%

• Service Property Trust (Nasdaq: SVC) Up 7.83%

• Outfront Media Inc (NYSE: OUT) Up 6.87%

• Clipper Realty Inc (NYSE: CLPR) Up 6.54%

• NexPoint Residential Trust, Inc. (NYSE: NXRT) Up 6.28%  

• Xenia Hotels & Resorts Inc (NYSE: XHR) Up 6.00

📉 Biggest Losers This Week: Healthcare and Industrial REITs

• Medical Properties Trust Inc (NYSE: MPW) Down 3.74%

• Plymouth Industrial REIT Inc (NYSE: PLYM) Down 2.03%

• Newlake Capital Partners Inc (OTCMKTS: NLCP) Down 2.02%

• Rexford Industrial Realty Inc (NYSE: REXR) Down 2.01%

• Community Healthcare Trust Inc (NYSE: CHCT) Down 1.85%

• Terreno Realty Corp (NYSE: TRNO) Down 1.71%

• Medalist Diversified REIT Inc (Nasdaq: MDRR) Down 1.46%

ONE FOR THE ROAD

Medical Properties Trust Gets Whacked On Double Dose Of Bad News

Who: Medical Properties Trust Inc (NYSE: MPW) is a Birmingham, AL-based healthcare REIT that owns and operates 436 general acute care with 43,000 licensed beds and other properties across the U.S. and nine other countries, with locations in Europe and Australia.  

What: On August 22, Medical Properties Trust cut its quarterly dividend by 46.7%, from $0.15 per share to $0.08 per share. The new dividend is payable on October 10 for shareholders of record on September 9 and the ex-dividend date is also September 9. The dividend cut wasn’t completely unexpected as the former yield was well above 12%. The new yield at Wednesday’s close was 7.26%.

As if the dividend cut wasn’t bad enough, Steward Health Care announced it had filed suit against Medical Properties Trust for thwarting the sales of Steward’s hospitals.

The double dose of bad news came just one week after Medical Properties announced it had sold 11 medical facilities in Colorado to the University of Colorado Health for a total of $86 million. The original cost was $64 million and Medical Properties Trust said it intends to use the proceeds from the sale to reduce debt and for general corporate purposes. Shares rallied as high as $5.01 after that news. But MPW has now sunk nearly 12% since the dividend cut and lawsuit were announced.

Takeaway: Medical Properties Trust is like a football quarterback who continually takes his team down to the opponent’s five-yard line, only to fumble or throw an interception. As recently as January 2022, shares were trading near $18.60, but this week MPW touched a low of $4.33.

Contrarians and optimists may see the latest news as presenting a good opportunity to buy the stock inexpensively. After all, the dividend yield is still high, the recent sales will reduce MPW’s debts and with the dividend cut, the payout ratio is down to 35%. However, existing shareholders are not quite as exuberant after these latest fumbles. And then there’s that short interest at 36%…